In Cho affair, prosecutors zero in on equity fund

Aug 29,2019

Prosecutors zeroed in on a private equity fund linked to justice minister nominee Cho Kuk’s family on Wednesday and asked at least three people to return to Korea for questioning.

They said the three people, including Cho’s first cousin once removed, were involved with the fund and had all left the country after a hydra-headed scandal about the nominee’s relatives and their pasts hit the headlines.

Prosecutors are investigating numerous criminal complaints filed against Cho and his family, mostly about their wealth and his daughter’s special treatment in her school career. The Seoul Central District Prosecutors’ Office raided four universities, the Busan government office and at least three other places Tuesday less than a week before Cho’s non-binding confirmation hearing is set to be held next Monday and Tuesday.

On Wednesday, the prosecution’s radar fixed on Co-Link Private Equity (PE). According to documents Cho submitted to the National Assembly ahead of the confirmation hearing, Cho’s family invested 1.05 billion won ($865,000) in a private equity fund managed by PE called Blue Core Value-Up 1, including 950 million won invested in the name of Cho’s wife and 50 million won each invested in the names of Cho’s son and daughter.

Blue Core Value-Up 1’s total capital was 1.4 billion won, including investments from Cho’s brother-in-law and his two sons, which is why prosecutors see the private equity fund as being basically owned by the Cho family.

In mid-2017, Blue Core Value-Up 1 invested 700 million won in a tiny company called Wellscnt, which produced streetlamp switches, becoming the largest shareholder.

Then came the suspicious part: The company’s performance started to take off.

Citing data he recently received from the Public Procurement Service, Rep. Jeong Jeom-sig of the main opposition Liberty Korea Party (LKP) said Wellscnt sold its products to 44 local government offices and public companies through 177 deals from August 2017 to last month, including the Dobong District Office in northern Seoul, Changwon city government in South Gyeongsang and Daegu Infrastructure Corporation.

Cho’s critics believe the justice minister nominee may have used inside information he gained while working as President Moon Jae-in’s senior secretary for civil affairs from May 2017 to last month to help the company get contracts and allow his family to benefit.

Prosecutors said Wednesday that the CEO of PE, Cho’s first cousin once removed who is suspected to be PE's actual owner, and the former CEO of a company somehow linked to PE all fled Korea after Cho’s scandal broke. All three have been asked to return to the country to answer questions.

Cho said Wednesday morning as he was entering his office in Jongno District, central Seoul, that he was “a bit baffled” that prosecutors started investigating him before his confirmation hearing but added that he and his family would faithfully cooperate with the probe. Cho apologized once again for letting the public down.

“There were many opinions on the appropriateness of holding a confirmation hearing for a justice minister nominee who’s a suspect in a prosecution probe,” said Rep. Na Kyung-won, floor leader of the LKP.